Employers, lawyers, clients, friends, and random Googlers: do you understand how dangerous PAGA claims can be? The California Court of Appeal just provided a clinic on the subject. So, let’s review the Court’s decision in Huff v. Securitas Security Servs. USA, Inc. (opinion here).
First, for those of you a little behind in your reading, here’s a summary from the Court of what the Private Attorney General Act of 2003 (“PAGA”) is:
PAGA was enacted in 2003 to allow private parties to sue for the civil penalties previously only recoverable by a state agency. . . . PAGA created a type of qui tam action, authorizing a private party to bring an action to recover a penalty on behalf of the government and receive part of the recovery as compensation. [ ] When an employee brings a representative action under PAGA, he or she does so “as the proxy or agent of the state’s labor law enforcement agencies, not other employees.” ****
“The purpose of the PAGA is not to recover damages or restitution, but to create a means of ‘deputizing’ citizens as private attorneys general to enforce the Labor Code. …. The relief provided by the statute is designed to benefit the general public, not the party bringing the action. (Ibid.) Since PAGA is fundamentally a law enforcement action, a plaintiff must first allow the appropriate state authorities to investigate the alleged Labor Code violations, by providing the Labor and Workforce Development Agency with written notice of the violations. … Only if the agency elects not to pursue the violations may an employee file a PAGA action. (§ 2699.3, subd. (a)(2).) The penalties that can be recovered in the action are those that can be recovered by state enforcement agencies under the Labor Code; they are separate from the statutory damages that can be recovered by an employee pursuing an individual claim for a Labor Code violation. … Penalties recovered by a plaintiff in a PAGA case are paid mostly to the state. (See § 2699, subd. (i) [75 percent distributed to the Labor and Workforce Development Agency, and the remaining 25 percent to aggrieved employees].)
PAGA penalties are either the penalties contained in the applicable Labor Code statute or, if there is no penalty prescribed, a catch-all penalty of $100 per pay period, per employee, for each violation. For repeat violations, the penalty increases to $200 per pay period, per employee. For semi-monthly pay periods, that’s 24 X ($100 or $200) X the number of employees affected. But if the violation only stretches across one pay period, the penalty is only $100 per employee, right? Sure, but that’s per violation, per employee. 10 Labor Code violations? Not out of the question, given how many “opportunities” for violations the Labor Code provides.
Now that you know what PAGA is, you may want to know why I say it’s so dangerous. It’s not the fact that the penalties can add up, as discussed above. Let me explain.
Let’s say one employee was not paid for a late meal period. That’s a Labor Code violation, as we know. The employee is due one hour’s pay at the regular rate, as a “premium.” And the employee can collect a civil penalty for underpayment via PAGA. That penalty could be in the Wage Order, or in the Labor Code.
Our employee in the example above decides to sue. And she wants to bring the claim not only on her own behalf, but also on behalf of any other employee who didn’t get a meal period timely, and who didn’t receive a premium.
Sure, the employee can sue for the unpaid meal period premiums. But he or she cannot sue for those premiums without first satisfying class action requirements. To bring a class action successfully is not always easy to do. And the plaintiff in a class action is a fiduciary and has to provide notice to the class and meet other requirements.
PAGA, on the other hand, does not require a plaintiff to bring a class action to pursue the PAGA penalties that the Labor Commissioner might have sought. PAGA claims are “representative” actions, not class actions. Our example employee can seek PAGA penalties attributable to violations against anyone else who worked for the same employer, missed a meal period and did not receive the premium. The employee sues as if he or she were the Labor Commissioner and goes after the penalties that the Labor Commissioner is authorized to pursue.
One catch is that the employee can use this “representative action” only to pursue the PAGA penalties, not unpaid wages. And another catch is that the employee gets to keep only 25% of the penalties. 75% must be paid to the state, which was the “real” plaintiff in the first place.
Are you with me so far? Because I haven’t gotten to the scary part yet.
In my example above, I discussed an employee who could claim one meal period violation and, as a result, seek PAGA penalties for any employee who suffered a similar violation. You might ask: can that employee seek PAGA penalties for violations that were not perpetrated against him or her. That is, can the employee also claim PAGA penalties for, let’s say, miscalculation of overtime when the employee did not work overtime? That is the precise issue the Court addressed in the Securitas case.
Here are some of the facts from the Court’s opinion:
Huff worked as a security guard for defendant Securitas Security Services USA, Inc. ****
Huff was employed by Securitas for about a year, during which time he worked at three different client sites. After he was removed from an assignment at the request of the client, Huff resigned his employment. Two months later, he sued Securitas for Labor Code violations. The operative second amended complaint contains a representative cause of action under PAGA, seeking penalties for Labor Code violations committed against Huff and other employees. According to the complaint, the basis for the PAGA claim is that Securitas is subject to penalties for violations of “numerous Labor Code provisions.” The Labor Code provisions alleged to have been violated include sections 201 [requiring immediate payment of wages upon termination of employment]; 201.3, subdivision (b) [requiring temporary services employers to pay wages weekly]; 202 [requiring payment of wages within 72 hours of resignation]; and 204 [failure to pay all wages due for work performed in a pay period] (unspecified statutory references are to the Labor Code).
After Huff presented his case, Securitas moved for judgment under Code of Civil Procedure section 631.8. The trial court granted the motion, finding that the evidence established Huff was not a temporary services employee as defined by section 201.3, subdivision (b)(1), and as a result could not show he was affected by a violation of that section. The court further decided that Huff had no standing to pursue penalties under PAGA on behalf of others who were affected by that violation. Judgment was entered in favor of Securitas.
However, the trial court later reversed itself. The trial court decided that Huff indeed could pursue PAGA penalties based on Securitas’s failure to comply with Labor Code section 201.3, even though Huff himself did not qualify for the penalty. Securitas appealed that ruling.
So, the question for the Court of Appeal was: could Huff seek PAGA penalties on behalf of other employees for violation of section 201.3, when Huff himself was not subjected to a violation of the Labor Code provision at issue?
Yes. Yes he could. The Court of Appeal decided that if Huff could prove a violation of just one section of the Labor Code as to him individually, he had standing to seek penalties for any Labor Code violations that allow penalties to be recovered, and on behalf of any other employees.
Here is some of the Court’s opinion on the subject:
Securitas does not dispute that PAGA authorizes a plaintiff to recover penalties for Labor Code violations suffered by other employees. But it argues the statute allows for that only when the violations against the other employees involve the same provision of the Labor Code as the violation suffered by the plaintiff.
The proposition that PAGA allows an employee to pursue penalties only for the type of violation he or she has suffered is directly at odds with the provision that an action may be brought by an employee against whom “one or more” of the alleged violations was committed.
Securitas asserts that applying the statutory definition of “aggrieved employee” as we do here leads to absurd consequences. It worries that the penalties collectable by PAGA plaintiffs will be “bounded solely by [their] pleading imagination.” But a PAGA plaintiff does not collect penalties merely by alleging a Labor Code violation in the complaint. The plaintiff still must prove at trial that a violation in fact occurred. Procedural mechanisms such as summary adjudication remain available to weed out meritless claims before trial. (Code of Civ. Proc. §437c, subd. (f)(1).) Perhaps Securitas’ concern is more about plaintiffs who bring PAGA claims solely as a fishing expedition to attempt to uncover other violations committed by the employer. Though that concern is better directed to the Legislature, we note that the trial courts are also equipped to manage cases in a way that avoids unreasonable consumption of time or resources.
To sum up,
we conclude that PAGA allows an “aggrieved employee” ––a person affected by at least one Labor Code violation committed by an employer––to pursue penalties for all the Labor Code violations committed by that employer.
Put another way, a plaintiff who suffers just one Labor Code violation covered by PAGA may seek all PAGA penalties, for any type of violation, committed by that employer against any other employee. And to make matters worse, the employee can seek those PAGA penalties for violations that allegedly occurred to other employees, but about which the employee has no first-hand knowledge. That is, the employee can sue first, and obtain discovery of violations later. The California Supreme Court so decided a while back.
So, now you see what I mean. The single plaintiff can start out with a minor Labor Code violation and use broad, expensive discovery to root out any and all other PAGA violations, subject only to the trial court’s management of the case and the willingness of the plaintiff and his / her counsel to keep on fishing. Or, the plaintiff can extract a settlement based on employer fear of a burdensome fishing expedition via discovery, and the possibility of zillions in penalties. But that never happens.
Take comfort though. The Court pointed out that employers who do not like the statute can go to the Legislature for redress. Good luck with that.